A Health Plan 'Down Payment' Is One Way States Try Retooling Individual Mandate

As congressional Republicans and the Trump administration keep chipping away at the Affordable Care Act, a number of states are enacting laws that aim to safeguard its central provisions.

The GOP tax plan approved by Congress in the last days of 2017 repealed the ACA penalty for people who fail to carry health insurance, a provision called the individual mandate.

But before that federal change happens next year, some states are working to preserve the effects of the mandate by creating their own versions of it.

Maryland is on the cutting edge with legislation moving through both chambers of the Statehouse.

"We've been just struggling since Trump became president with how to protect the ACA in our state," says Vincent DeMarco, president of the Maryland Citizens' Health Initiative, a nonprofit organization that has been instrumental in pushing the measure.

Creating an individual mandate is just one way that states — generally blue states where Democrats control the legislature — seek to ensure what many lawmakers view as key advances made by the ACA don't disappear.

And they're looking to one another as test cases to see how state-level legislation can either buttress or alter the ACA, according to Trish Riley, the executive director of the National Academy for State Health Policy.

"One state will try one approach, others will try it," Riley says. "It's an experiment and an important one."

Time is short since most states have limited legislative calendars and are fast approaching the deadlines for insurers to file their 2019 rate plans.

Passing and implementing these kinds of measures will be tough, says Sabrina Corlette, a research professor at Georgetown University's Health Policy Institute, but adds: "I think there's still a window of opportunity for states to do something and have an impact on 2019 premiums."

How it's being done

The federal individual mandate was put in place to make sure that younger, healthier people joined the insurance risk pool, helping to stabilize the market. The idea is that those customers help cover the insurers' costs for sicker customers' care, which keeps premium costs manageable.

The Congressional Budget Office estimated that 13 million people nationwide would become uninsured without the individual mandate. Health care experts and insurance officials have offered strong warnings about what could become of the individual insurance market without intervention.

Most states that are contemplating replicating the insurance requirement have opted to follow the path put in place by the federal mandate.

Maryland goes one step further, using the tax penalty, advocates say, as a "down payment" on an insurance policy.

Beginning in 2020, if someone in the state indicates on their taxes that they're uninsured, instead of simply depositing the fine in a general fund, Maryland would use it, plus any tax credits from the federal government, to buy an insurance plan for that individual.

The state would match its residents only with plans that cost nothing more than the fine plus the federal subsidy. So, if such a plan isn't available in a person's area, the state will hold on to the money in an interest-bearing account until the next open enrollment season. Then, the person has another chance to buy insurance. If at this time they don't purchase a plan, the state will deposit the money into an insurance stabilization fund.

But Jason Levitis, a senior fellow at Yale Law School's Solomon Center for Health Law and Policy, who has been instrumental in helping other states craft their own proposals, cautioned that this kind of approach could face administrative challenges.

States that follow a path that tracks more closely with the federal mandate, he says, will have an easier time implementing it because regulators have already had five years of experience enforcing it. That's why he favors approaches that use the same terminology, definitions and basic structure as the federal mandate.

But a sampling of pending state proposals highlights a common theme. "All the mandate efforts are based on the federal one," Levitis says. "The variations are what you put on top, [how states] individually keep track of the money people pay and use it for healthcare services."

He points to Connecticut as an example. It has two bills pending in its legislature – one that closely mirrors the federal mandate, but with slightly lower fines, and another in which the fines would be deposited into health savings accounts for the individuals.

Meanwhile, in New Jersey, a Senate panel advanced a two-bill approach this week that would collect a fee from residents who opt against buying health insurance. These fines would then be used to help pay the health care claims of people who are catastrophically ill.

In the D.C., a health care working group recommended an individual mandate nearly identical to the federal one. The plan would require city council and Congressional approval to become law.

Washington state has convened a group to study how to enforce a mandate and, in California, no legislation has been introduced yet.